In 2008, the Global Financial Crisis, or GFC, came upon us. For many countries it spelt disaster. Recession, job losses and financial bail-outs were the norm. It was considered one of the worst economic situations since the Great Depression in the 1920’s. The GFC was caused by a sub-prime mortgage crisis that began in the US. The crisis then developed and spread worldwide. Many firms found themselves in trouble, none more so than the Lehman Brothers investment bank, which due to excessive risk taking, collapsed.
While Greece’s trouble during and since the GFC has been well publicised, another country, on the western tip of Europe, found itself in nearly as much trouble. Ireland, up to then experiencing unprecedented growth in its economy, and going through a period that became known as the Celtic Tiger, went close to financial ruin.
A property bubble was created in the years running up to the GFC in 2008. Housing prices were at the highest they had been, peaking in 2006 and stabilising in 2007. A year later, the bubble burst. Homeowners were unable to pay back their loans, negatively affecting the banks holding the debt. The banks, now in trouble and with the Irish government struggling to sustain them, needed help from outside. While due to the uncertainty surrounding the Irish economy, interest rates rose dramatically.
With such uncertainty, it was up to outside parties to step in. Much of the Irish debt was owed to corporations outside the country, such as banks in the UK. Their domestic troubles had the potential to impact on the British economy as well as that of all the EU. There was also the worry that as Ireland was a member that used the euro, any collapse could negatively impact on the Euro’s strength in the market. With all that and more taken into consideration, it was up to the IMF, the EU and other countries to step in and bail-out the failing Irish economy.
The impending recession had a major impact on housing prices which plummeted to half the price by 2011 and eventually falling below house prices recorded in 2001, the first year of the Celtic Tiger. There were many parties at fault for the impact of the crisis in Ireland during those years. Banks were blamed for their loose lending practices and corruption in some cases, while financial regulators were also accused of not doing their job. The ruling party at the time, especially their leader Bertie Ahern, came under most scrutiny. Immediately voted out at the next general election, Fianna Fáil haven’t found themselves back as the leading party since. The construction industry was also blamed because of its employment of part-time builders. At the time, construction jobs made up 12% of the workforce an abnormally high amount and one which was unsustainable.
Lastly, it was said to be the fault of the media who promoted a national fascination with buying and renovating property. Each newspaper had its own separate section and property shows became the norm.
Ireland has since made a recovery but with housing prices so high in Sydney, it’s not completely unrealistic to think something similar may happen in Australia too.
Megan DeGrom was born and raised in New Jersey just outside the Pine Barrons. As a journalist, Megan has contributed to many online publications including Rotten Tomatoes and Variety. In regards to academics, Megan earned a degree in business from St. John’s University. Megan covers economy stories here at Clear Publicist.